The Knights Templar and money lending

The Knights Templar were warriors, monks, farmers, royal advisers and bankers all rolled into one. Whether they sat on fabled mountains of gold – it was certainly widely believed (particularly by certain monarchs) that they did – they certainly lent vast sums to popes and princes. The Paris Temple in particular was a heavily fortified bank in the eyes of the French kings.

As today’s banking system sees its reputation torn to shreds, it’s worth recalling that our banks owe a debt to the Templars for creating an early system of lending and credit. So how did it work?

Well, in a pre-capitalist age without modern banking, you might have to haul large amounts of bullion around with you when you went off on crusade or even dig a hole in the ground to hide it. Not exactly sophisticated. Your wealth would largely be based on land and that was at risk of being seized by somebody unscrupulous while you were away. So step forward the Knights Templar with an easier way to access your money while on crusade without having to heave great sacks of it with you.

They issued letters of credit – a promise to pay the bearer the designated amount. These could be cashed in – bit like old fashioned travellers’ cheques – at Templar houses or preceptories. The order would charge a kind of administration fee to avoid the charge of usury. It was sin to charge interest on loans – a religious rule still followed today by Islamic financial institutions where ‘enhanced capital’ is OK but not outright earning of interest. Jewish lenders were permitted to charge interest, which contributed to anti-Jewish feeling in times of economic crisis or political upheaval.

Templar enthusiasm for the world of high finance may have originated at the Champagne Fairs – a massive market held in Troyes and other towns in the Champagne district of France. This was where the first Templars originated from so the order had strong links to this part of the world. Merchants would come from all over Europe bringing goods from further afield including the Middle East. To ease the flow of transactions, the Templars developed their credit note system. The knights themselves would have been selling their wool and other produce from their manors to fund their crusading activities in outremer.

6 Comments on “The Knights Templar and money lending”

Ah, this clears up some misapprehensions I had about the nature of the Templars’ banking activities. There’s another article here from some time back about how the Templars engaged in usury but the Pope turned a blind eye to this – but this isn’t quite true, as shown here. Usury isn’t simply the act of charging more than the principal for a loan. This is a common misunderstanding, both then and today. The typical definition is that it is the act of selling for something that does not exist. The canonical example is charging you for a bottle of wine, and then charging you for drinking it. Your right to drink it does not exist separately from the possession of the wine. But if I were to, say, loan you a donkey so you could haul your goods to the next village to sell, but charge you some extra gold for your use of the donkey, there would be nothing wrong with that. The difference is that the wine is consumable – using it consumes it – but the donkey is not. If you use the donkey this week, I can still use it the next week. But if you drink the wine this week, it’s gone forever. So loaning money, which is consumable, would be like “loaning” wine – the borrower “buys” the money, but pays for it later, and the lender cannot charge him for the use of the money, since the only thing you can do with money is spend it, and “selling” the lender the money without allowing him to spend it is meaningless. In this case, however, the administrative fee reflected a real cost incurred by the lenders – it’s not exactly cheap to move loads of bullion up and down the Mediterranean. There’s plenty more to usury than that and I can’t go into it all, but here’s a good resource on it: https://zippycatholic.wordpress.com/2014/11/10/usury-faq-or-money-on-the-pill/